CH. SHAHID IQBAL DHILLON, (JUDICIAL MEMBER).--- The titled appeal has been preferred at the instance of taxpayer calling in question the impugned order dated 10.05.2016 passed by the CIR(A) Lahore.
2. The taxpayer also filed miscellaneous application for correction in stay order however , at the time of hearing the learned AR elected to not press the same. Therefore, the same is dismissed accordingly .
3. Brief facts of the case are that the while filing the return of Income for the year, the appellant claimed adjustment of minimum tax of Rs.37.028 (M) brought from tax years 2011, 2012 and 2013 in terms of Section 113(2)(c) of the Income Tax Ordinance, 2001. The Additional Commissioner after finding that the adjustment claimed under section 113(2)(c) of the Ordinance was not available under the law amended the deemed order passed under section 120
(1) of the Ordinance and disallowed credit under section 113(2)(c) of the Ordinance to the Ordinance of Rs.35.232(M). On appeal, the learned CIR(A), Zone-I, Lahore rejected the appeal of the appellant by relying solely on the judgment of Sindh High Court reported as 2013 PTD 1420 .
3. The learned AR of the appellant vehemently contested the treatment meted out in the case of the appellant and argued that the Order passed by the learned CIR(A) is illegal, perverse, arbitrary , opposed to the facts and circumstances of the case. He submitted that first appellate authority has failed to apply mind judiciously and the order has been passed with a predetermined mind without properly appreciating the spirit of relevant provision of law. While arguing the case, the learned A.R. apprised this court of the facts of the case as well as relevant provisions of law were also explained in detail. Before going into the legality of the claim, certain facts of the case needs to be discussed which will be helpful in comprehending the issue in question.
4. The taxpayer suffered loss for the tax year 2011 and tax year 2013 and paid minimum tax under section 113(1) of the Income tax Ordinance, 2001. As regards tax year 2013 minimum tax was paid at Rs. 25.339 (M) as the same was higher than the tax payable on returned income at Rs.23.543 (M). Following is the' detail of assessments of the previous years in this case:-- Tax year Income/loss declaredNormal Tax Minimum tax paid Claim under section 1 13(2)
(c)
2013 (78.79) 0 14.264 14.264 2012 62.268 23.543 25.339 01796 2011 (136.001) 0 20.968 20.968 Total 23.543 60.569 37.028
5. While filing the return of Income for the tax year 2014, normal tax liability was arrived, therefore, the taxpayer by relying upon the provisions of section 113(2)(c) adjusted the credit of above mentioned minimum tax paid under section 113(1) of the Ordinance. Howeve r, the learned Additional Commissioner finding that the appellant was not eligible of getting the credit under the aforesaid provision of law issued Show-Cause Notice with the intention to disallow the above adjustment of carried forward minimum tax paid by it with the observation that the benefit is available to the taxpayers where tax paid under subsection (1) of Section 113 exceeds the actual tax payable under Part 1, clause (1) of Division I, or Division II of the First Schedule. As per observation of the Additional Commissioner as the appellant had not paid any tax under normal tax regime, therefore, the credit under section 113(2)(c) was not available. After finding the reply submitted by the appellant unsatisfactory , the learned Additional Commissioner disallowed the tax credit of Rs. 35.232(M). Later the order passed by the Additional Commissioner was maintained by the Commissioner (Appeals) through order dated 10.05.2016.
6. Before attending to grievance of appellant, the provision of section 113 are reproduced for reference of convenience.
[113. Minimum tax on the income of certain persons.---( 1) This section shall apply to a resident company , an individual (having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent tax year) and an association of persons (having turnover of fifty million rupees or above in the tax year 2007 or in any subsequent tax year) where, for any reason whatsoever allowed under this Ordinance, including any other law for the time being in force--
(a) loss for the year ;
(b) the setting off of a loss of an earlier year;
(c) exemption from tax;
(d) the application of credits or rebates; or
(e) the claiming of allowances or deductions (including depreciation and amortizatio n deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than one per cent of the amount representing the person's turnover from all sources for that year: Provided that this subsection shall not apply in the case of a company , which has declared gross loss before set off of depreciation and other inadmissible expenses under the Ordinance. If the loss is arrived at by setting off the aforesaid or changing accounting pattern, the Commissioner may ignore such claim and proceed to compute the tax as per historical accounting pattern and provision of this Ordinance and all other provisions of the Ordinance shall apply accordingly .
Explanation .---For the purpose of this subsection, the expression tax payable or paid does not include tax already paid or payable in respect of deemed income which is assessed as final discharge of the tax liability under section 169 or under any other provision of this Ordinance.
(2) Where this section applies:
(a) the aggregate of the person's turnover as defined in subsection (3) for the tax year shall be treated as the income of the person for the year chargeable to tax;
(b) the person shall pay as income tax for the tax year (instead of the actual tax payable under this Ordinance),
(c) where tax paid under subsection (1) exceeds the actual tax payable under Part I, clause (1) of Division I or Division II of the First Schedule, the excess amount of tax, paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year: Provided that the amount under this clause shall be carried forward and adjusted against tax liability for years immediately succeeding the tax year for which the amount was paid.
7. It is contended by the AR that the law is to be interpreted as a whole organ making the interpretation in coherence with various provisions of enactment and by interpretation of any provision in isolation shall divert to different meaning not intended by the law maker . While interpreting various terms used in Section 113(2)(c) the same have to be looked into in the context the same are used in whole of the Ordinance.
8. The learned departmental representative supported the stance of the depart ment as explained in the order passed by both the forum below .
9.We have heard the arguments put-forth by the learned representatives of both sides and perused the available record. After due consideration, we find that as per subsection (e) of Section 113(1)(e) tax is required to be charged where "no tax" is "payable" or "paid" by a person or tax "payable" or "paid" is less that 1% of the turnover .
Therefore, while interpreting the terms "payable" or "paid" as used in section 113(2)(c) reproduced above, the same meanings have to be associated. The provisions of section 1 13(1)(e) is reproduced hereunder:--
(e) the claiming of allowances or deductions (including depreciation and amortizatio n deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than one per cent of the amount representing the person's turnover from all sources for that year: Since tax under section 113 is imposed includes the condition where "no tax is payable" under normal law, therefore, while interpreting the provisions of section 113(2)(c) the situation of tax payable shall have to be interpreted so to make the whole section in coherence. We are of the view that the credit under section 113(2)(c) is beneficial in nature and incorporated to reduce burden of taxation of cases earning lesser income or sulfuring losses therefore the same have to be interpreted liberally . Tax payable under section 113 is not actual tax liability rather the same is imposed through deeming provisions by making a company pay taxes even it suffers losses.
However , while the government extended a benefit in terms of section 113(2)(c) which is in the nature of payback of tax recovered over and above the actual tax liability then how the loss cases can be excluded from such benefit.
Therefore, it is absurd to say that credit is available only to the taxpayers earning profit while the recovery has been made from the taxpayers who were even bearing losses.
11. Section 113 provides a different concept of income which is alien to section 4 (which is main charging section) where no tax can be charged where NIL income or loss is earned. However , subsection (1) of section 113 provides that aggregate of turnover shall be taken to be income of the taxpayer for charging tax 1% of the turnover . Further the subsection (1) also covers the eventualities of loss or B/F loss and even exemption from tax. At this juncture, we feel it necessary to refer to the provisions of section 1 13(2)(c) which is reproduced hereunder:--
(2) Where this section applies :
(a) .......
(b) .......
(c) where tax paid under subsection (1) exceeds the actual tax payable under Part I, clause (1) of Division I, or Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year: Provided that the amount under this clause shall be carried forward and adjusted against tax liability for years immediately succeeding the tax year for which the amount was paid.
(Emphasis added)
From bare perusal of above, it is clear that the subsection (2) covers whole of the section and nothing has been excluded from application of subsection (2). Further , the expression "where tax paid under subsection (1)" also covering the all possibilities of imposition of tax under section' 113 i.e. loss cases. B/F loss cases and exempt cases etc.
12. We further observe that the term "no tax payable" refers to a zero tax payable. The zero is a lowest mathematical amount payable and also the zero is an intermediary point between negative and positive mathematical numbers. Therefore zero cannot be excluded from the term "payable". Therefore, we agree with the argument of the AR that the term "payable" as used in clause (c) cannot be read ignoring the NIL or Zero value.
The zero is thus the starting point of positive integers and therefore zero or nil cannot be excluded from purview of "payable". Thus in the case of declaration of loss "tax payable or paid" shall be nil or zero or more than zero therefore, cannot be considered in a manner so E as to throw out the present taxpayer from the ambit of section 113(2)(c) of the Ordinance.
13. In the end, we would like to refer to the decision of this Tribunal recorded in I.T.A. No.441/LB/2006 in the case of Messrs D.G. Khan Cement Company Limited, where in similar circumstances this Tribunal while accepting the appeal of the taxpayer company , vacated the orders of both the forums below which resulting into grant of credit under section 1 13(2)(c) of the Ordinance.
14. In view of the above, we are inclined to hold that section 113(2)(c) of the Income Tax Ordinance, 2001, is also applicable in loss cases or zero tax payable cases and benefit of the said section cannot be rejected by the Department. Consequently , we vacate the impugned order passed by the authorities below and accept the appeal of the taxpayer .